When we decided to retire early we took the opportunity to look closely at our housing options moving forward. We took a deep dive into both our personal needs regarding a home of our own, and also into what we could afford on our retirement budget. What we discovered about ourselves and our new retirement mindset was surprising. Going through that process helped us design clear parameters for our housing choices moving forward.
It became clear to us during that planning process that when we make decisions about housing, there are two main aspects to fully consider — emotional and financial. Most people have an emotional attachment to their home, and for many people their home actually feeds their sense of self worth. Our home also impacts our ability to feel grounded as well as our sense of being safe.
Understanding what you personally get from your sense of home and how that might link to your health and happiness is liberating. Having that emotional element figured out can also make it easier to understand how your sense of home can affect your housing budget. As social beings we want a home we can use for sharing time with family and friends. Many people also want a home they can feel proud of which might add an emotional attachment to the look of your home, even at the expense of your financial wellbeing.
Last year we sold our personal residence. It was a place we truly loved, but we decided to put the proceeds to work in our index fund investments which allowed us to quit our jobs. We wanted to stop working, and to stop working we had to sell our home. That process included separating our home from our ideas about quality of life and from our personal sense of happiness. One year later we are still glad we made that decision. At this point in our lives we don’t need a home of our own to be happy, because for us right now our sense of home is not the same as our housing.
What is Home?
As I write this, I’ve just come back from walking Brassy the dog since we are pet sitting for a month in Boquete, Panama. I’m out on the patio drinking a cup of coffee made from local beans and typing away on this post with a view of the backyard, feeling the breeze that blows up the valley from the Pacific. The sun has been up for about an hour, the birds are singing, and the hummingbirds are swarming the feeders. Soon I’ll make scones from a recipe I found in Scotland when we were traveling there with my mom last summer. Ali and I have a routine here in this house that revolves in large part around Brassy and her needs as well as our own habits. We each have our favorite spots to work or read in. We each enjoy doing our favorite household chores here. We feel grounded and happy. And we’ll be leaving this house in 2 weeks. For us this is Home right now.
In the Beginning
Ali and I are both originally from California. We grew up in different parts of the state and lived there until we were each in our 20s. Once California stopped feeling like home we both found our own ways to Seattle a decade apart. I moved to Seattle because it was close to where my favorite aunt lived and I wanted to be close to her. Ali moved to Seattle because she was ready to move away from her childhood home and once she found her dream job they gave her the opportunity to move and continue to thrive in her role in a new location.
When we met we were both focused on our careers and entrenched in the ideas of what we “should” do to achieve the American Dream and keep up with the accomplishments of our friends and family. For us that meant we had to have good jobs, be in a supportive and loving relationship, own a nice home in a good community, climb the ladder at work, buy a weekend home, and travel. We were determined to do it all. Luckily, we were also determined to save every penny we could and invest as much as possible in our retirement accounts, otherwise we wouldn’t be where we are today.
After 14 years together we had gotten a couple of promotions, bought our condo and paid it off, owned and sold a weekend home, and lost interest in climbing the ladder at work and in comparing ourselves with others. We felt exhausted, stressed out, and unsatisfied. During our last 5 years in Seattle we also took three trips to Europe. Those vacations were an excellent getaway from our intense lives in Seattle and increased our happiness, but those trips weren’t frequent enough to be the change we needed.
When is it Time to Move?
We’ve all played that game, “What would you do if you won the Lotto?” We had fun playing that game to make sure there were no rules when we brainstormed our dream life after retirement. Once we decided to sell our condo we wanted to map out as many new ideas as possible for where we might go next. Once again we turned to our family mantra, All Options Considered, and went back to the white board.
In that moment we didn’t consider buying a new home since our FIRE number was dependent on selling our condo and investing that money. One option we considered was renting somewhere other than Seattle but still within Washington State with a lower cost of living, such as Vancouver or Port Angeles. We also considered moving to a different state with a lower cost of living since we had friends that had done that including our buddy Fred who moved from Seattle to Arkansas, and our friends Kay and George who moved from Seattle to Missouri. The third option we talked about was NOT picking one new place to live, and instead traveling full time.
The idea of full time travel seemed the most far fetched but it came together pretty easily because we had a lot of inspiration to work with. We had been gathering travel ideas for our next vacation from folks who traveled full time themselves including Debbie and Michael from the Senior Nomads, Kristy and Bryce from the Millennial Revolution, Billy and Akaisha from Retire Early Lifestyle, and Jeremy and Winnie from Go Curry Cracker. Ironically, around that same time one of our condo friends Deborah handed us a book she had just read called “Home Sweet Anywhere” by Lynne Martin, which tells the story of a couple who was traveling full time. And in a flash we had a new focus.
Pretty quickly we decided to hit the road as renters living all over the world. Ali started researching and building itineraries in different regions, and I started crunching the numbers to build our new budget. By the time we were ready to sell our amazing little condo and leave Seattle we had a solid plan in place for living home-free.
There were clear emotional reasons that motivated us to make such a drastic change away from living in the condo we owned in Seattle to living home-free. As we reexamined our housing needs we acknowledged that our lifestyle in Seattle included feelings of status and ego based on our condo and its location in the South Lake Union neighborhood surrounded by the amazon.com headquarters. We also acknowledged to one another how we felt while living in our condo about trying to keep up with our friends in terms of their homes and financial choices when we really couldn’t afford to mimic them. Realizing those things motivated us to make a big change and shed our old ideas about what we “should” be doing. We asked each other what we wanted for ourselves, and in the process we figured out what our values are for housing at this time in our lives.
In the past I was interested in living in a set location for various reasons such as:
- I wanted to live near family
- I had a pet
- I had a job
- I was afraid to move away from what was familiar
- I owned a house and I wanted to keep it
- I had friends and a community I was deeply connected to
My current preference for living home-free works for me because:
- I don’t have a job
- I don’t have a pet
- I have very few belongings
- I don’t have a house to maintain
- My relationships with family and friends can endure being separated by distance and time
- My wife and I both enjoy exploring a new location, culture, and climate every few months
Right now, this is what home means to us (we can do this anywhere):
- Being anywhere together
- Being able to cook for ourselves
- Getting outside everyday to explore our surroundings
- Spending time online and in real life with new friends, old friends, and family
- Showing up in person when friends and family need us
- Learning about the history, culture, and people around us
This year I’ve learned how to feel grounded no matter where we are, which is partly because my sense of home is fulfilled. My life is finally focused on my relationships and personal connections.
Housing is expensive, and for most families it’s the single most expensive part of their budget. For some context, according to the US Department of Housing and Urban Development (HUD) paying more than 30% of a family’s income on housing creates a cost burden that could make it difficult to pay for things like food and medical care. HUD estimates 12 million US households are spending over 50% of their incomes on housing.
My dad used to say we should keep our housing costs at 25% or less than our total budget, which seemed like a good baseline for “All In” renting or buying. In 2009 we bought our condo in Seattle and at that time we were spending 30% of our income on housing. Amazingly, if we were still living in our condo today we would be paying almost 30% of our retirement income on housing with just HOAs, taxes, insurance, and utilities combined, and our mortgage paid off. After a year as home-free travelers we are on target to spend about 23% of our post-FIRE income on housing while we are traveling full time in 2019, and that works great for us right now.
Remember, it doesn’t help to start with judgements like buying a home is a bad investment, or renting a home is throwing money away. Your housing decisions are your own, and they are deeply personal.
Do Your Own Math
I’ve been working on several calculators to both track and compare the costs associated with each of our housing choices – rent, home-free, and buy. The link to my Rent vs Buy spreadsheet with those calculators is included here. Feel free to download, make a copy, and enter your REAL numbers so you can build out a dream that works with your personal budget and hopefully meets your emotional needs as well.
Rent vs Home-Free vs Buy
In most cases housing starts with the question, “Should we rent or should we buy?” When we explored that question last year the obvious answer for us was to rent, but not in the traditional sense since we decided we wanted to travel for the foreseeable future. We took the typical Rent vs Buy equation and added a new category called “Home-Free” which is a modified version of renting. Each of these three categories comes with a different budget based on its permanence in our lives.
For me renting means not having 100% control over the four walls we’re living in. If you’re someone who walks into a place and immediately starts thinking about tearing out a wall or remodeling the kitchen or bathroom, renting can be a challenge. There are major advantages to renting though, because it comes with a lot of other types of freedom such as lower maintenance and the ability to change locations more easily. I can get a shorter lease or a longer lease, and find a rental price that suits me and our budget. And if we’re not happy with our place we can move.
Ali and I were each renting when we met, and then we decided to buy a 1,700 sq ft home together at the northern edge of Seattle. When that house and location didn’t fit us anymore we decided to downsize away from that three bedroom home and start minimizing our lives. We moved into a 750 sq ft apartment in walking distance from my office and a short bus ride to Ali’s office. We had all the space we needed and the freedom to close the door and take off for the weekend. We enjoyed renting because if the water pipes froze and broke while we were gone, the property manager had to deal with it. We didn’t have to mow the lawn, trim the hedges, fix the roof, repair the shower, or have any trees cut down. We were happy to clean the floors, kitchen, and bathroom, and be done. We loved it.
We chose our rental based on our budget and proximity to work. Our “All In” rent number included the actual rent, our rental insurance, and utilities. Renting that place cut our commutes way down, saved us a ton of money, and improved our quality of life for sure. Once in a while one of our neighbors was noisy but we didn’t mind too much since we could move if we didn’t like it there anymore. We were happy to give up the feeling of having total control over our home so we could have control over our location, and even more control over our budget. It was liberating.
In order to be home-free renters we had to get real with ourselves about our budget. Once we quit our jobs and decided to live off our investments, it cut our disposable income in half. That meant our housing situation had to change and we were 100% comfortable with that. Our new budget and housing situation needed to fit with our FIRE number and what our investments can generate in a year. Since this is our first year after FIRE and getting there was attached to selling our home, we were definitely not ready to commit to a new housing situation with permanence. We had the urge to create a life that felt more flexible and spontaneous, and with a lot more freedom so that’s how we ended up living home-free in 2019.
Right now we don’t have a home base and we move every 1-6 weeks. Sometimes we move from one city to another in the same country, sometimes we move from one home to another in the same town, and other times we move from one country to another. We’ve been doing this for 14 months now, and we love it! Living home-free gives us a huge amount of control over our housing budget. Every location has it’s own cost of living, and we can choose to upgrade or downgrade on costs as we move from one location to another, and create balance by staying in different kinds of places. We can even drop our housing expenses down to zero for some periods by housesitting here and there as opportunities arise.
We still have a set budget for home-free housing during the year, and it’s critical that we meet it. Our all in home-free housing costs are really just the total costs of our stays in the apartments and hotels we rent, plus the annual membership fee of $119 that we pay to TrustedHousesitters. Our housing budget is $50 per night, or about $18,000 for the year. Our housing costs are the most critical element in our overall budget followed by healthcare, food, and transportation. As home-free renters Ali and I choose an area we want to visit and then the next step is to look for housesits that might fit, since that often requires us to adjust our travel dates to fit those arrangements. We fill in the gaps around housesits with apartment rentals, and then for shorter stays we look at hotels. We also travel back to the US to stay with family a couple times a year. All of those housing options and their wildly ranging costs just need to average out to hit our yearly housing budget. As of today we are on target to keep our 2019 housing costs at 23% of our total budget. We are under our housing budget for the year, and we’re thrilled to see our home-free plan is working.
Geoliberated. Our buddies John and David over at The Debt Free Guys and the Queer Money Podcast call their home-free lifestyle being geoliberated. We love that term and we whole heartedly agree with the philosophy. By not locking ourselves into a set housing payment for the year we can modify our housing costs each week and month, which frees up some cash for other things, like attending a Chautauqua retreat in Ecuador or taking Spanish lessons in Boquete, Panama.
Before buying it’s helpful to understand why you want to purchase a home since buying a personal residence is often more of an emotional choice rather than a practical one. In our case we have owned three homes together and in each case we had a really hard time figuring out the emotional aspects of purchasing or selling those places. Though we tried to convince ourselves that we were being wise and practical about our financial decisions for each of those homes, we definitely learned that our home ownership choices have been emotional and deeply personal. And everyone knows choices made from an emotional place don’t always neatly fit into budgets or support your financial health.
People often tell themselves buying a home is also an investment, and in some cases that can be true. But it can be hard to make a real profit when selling a personal residence, partly because of all of the maintenance costs for a home and also because you can’t control how locations change and real estate cycles go up and down over time. In our case two of our homes were money pits, but our condo did turn out to be a good investment. Regardless, from my perspective it doesn’t usually make sense to think of a personal residence as an investment since the decision to buy a home is so emotional.
Buying a home can theoretically be a stable housing expense since there are fixed numbers to work with. Once you set the purchase price for a home along with your down payment, that helps you calculate your monthly mortgage payments. We had a budget for the first house we bought together, but we definitely did not have a realistic understanding of our “All In” costs for that home which included the closing costs, our mortgage payment, home owner’s insurance, property taxes, utilities, and a heck of a lot more in maintenance costs than we could have imagined. We weren’t prepared for the bad seal in the shower that required a massive fix before selling. We also weren’t prepared for the winter storm that brought down a huge cedar tree and smashed our fence and our neighbor’s hedges. We had to hire someone to come cut the tree into pieces and remove it just so we could get our cars out of the driveways (thank goodness the tree didn’t hit our house or our neighbor’s house). By the time we were ready to sell we also had another set of real estate fees and closing costs to pay to let that place go.
When we bought our condo the costs that changed over time were our taxes, utilities, insurance, home maintenance costs, and also our HOAs which were increasing over time. Those are the types of things you have to include to get your “all in” housing number in order to stick to your budget when you buy a home. No matter how fixed your home ownership plan is, there will always be new and ongoing expenses when owning a home. The increasing HOA fees were the biggest surprise there and I’m still kind of shocked today knowing that our all in costs for our condo were at 30% of our current retirement income even with the mortgage completely paid off. In a way, you can become your own landlord as a home owner, but even in that case you still have to pay some kind of housing costs. If we decided to buy again we will definitely have a more complete budget for all in housing costs to work with.
The other aspect that’s often overlooked when selling is that it can sometimes take a while to find the right buyer. When a home sale drags on for more than a couple of weeks there could potentially be unexpected expenses you didn’t originally include in the equation of selling. We staged and moved out then listed our condo for sale November 1st, 2018 but it didn’t close until mid January 2019. This meant we had to arrange for other housing until we left Seattle for good. Additionally, having the sale carry over until January meant we had to arrange to sign the closing documents online since we were in Singapore when it finally closed. Thankfully this time, we had prepared for both variables and had planned for it in our budget for selling the condo.
Housing Money Crush
Someday we will probably want to stop traveling full time, and when that happens we will stick to our new process of focusing on the two most important aspects of choosing were we want to live by looking at our emotional needs and our budget. In fact, writing this post made me consider renting and it also made me consider buying again back in the US, which is why it took me so long to write this post! But after reviewing all of our options we are excited to spend next year living home-free again. When we settle down somewhere more permanent we will make sure we understand the emotional aspects of our housing needs at that point in our lives, and set a real budget that fits our financial resources as well as our personal goals.
When we decided we were ready to let go of our emotional attachment to our condo in Seattle, the whole world opened up to us. When looking at housing it’s important to make sure you prioritize what’s important in the moment and also think about how that might impact your options in the future. In our case, we know what we want right now and we acknowledge that could change at anytime. In your case you might ask yourself if you are moving to a new home for a job, or because your family is growing, or because you want to be closer to family? Are you downsizing to help facilitate other financial goals like retirement? Are you fulfilling a longterm dream to build your own home from the ground up on land you picked out with an amazing view that you love? It doesn’t matter what your specific emotional needs are around your housing choices, it only matters that you are open and honest with yourself about what your housing needs are.
We love our current home-free life, but we will keep talking about the idea of living in one location and what our housing needs might be at that time. At this point whenever we discuss our hopes and dreams we consider whether we want to continue to be home-free, or whether we want a more traditional rent or buy scenario. We have budget plans for each one of those options, because I love to play Money Crush and because we want to be free to change our minds whenever we are ready. Knowing those budgets helps us look into the future as we set our 1-year, 3-year, and 5-year plans. It helps us dream more openly and be realistic about our budget. And we acknowledge that if it doesn’t work in our budget that would put too much emotional strain on us and we know we would have to start the planning process all over again.
If we decide to rent in one location, we will have regular payments that could increase each time we sign a new lease, as well as utilities, and renters insurance. If we choose to continue living home-free, we have to actively make choices regarding location and duration of stay that fit within our annual housing budget. If we decide to buy another home we know there will be a big cash outlay to make that happen, which will have a huge impact on our investments. If we can buy without a mortgage we know there will be continued costs associated with maintenance, taxes, insurance, and utilities. We also know that home would appreciate in value based on its location, which can be hugely variable. And we know there could be lost opportunity costs with the money we commit to personal real estate verses other types of investments. There’s a lot to consider!
There’s No Place Like Home
For now, Ali and I are having a great time being home-free. We think we’re going to be doing this for 3-5 years at this point and we have the first year basically completed as I write this. But things could change at any time. When we dream about settling down somewhere we often talk about the idea of going back to the Pacific Northwest. And when we think about the kind of home we want there are a bunch of scenarios we keep considering, which range from a fixer-upper to a small modular place. We also talk about having a tiny home on land with enough space to live communally with friends. No matter what we choose we would love to have room to spend time in our home with family and friends.
Now ask yourself: How did you decide to live where you live right now? Do you put more emphasis on buying over renting or vice versa? Did you really consider your emotional needs for housing and how they impact your budget? Do you think your housing needs might change in the future?
Lastly, here are a few other ideas I want to share…
- The NYT Rent vs Buy calculator
- The mortgage calculators I like
- A few of the housing related blog posts I like: